Johnson and Johnson 2010 Annual Report Download - page 66

64 JOHNSON & JOHNSON 2010 ANNUAL REPORT
21. LEGAL PROCEEDINGS
PRODUCT LIABILITY
The Company’s subsidiaries are involved in numerous product
liability cases in the United States, many of which concern alleged
adverse reactions to drugs and medical devices. The damages
claimed are substantial, and while the Company is confident of the
adequacy of the warnings and instructions for use that accompany
such products, it is not feasible to predict the ultimate outcome of
litigation. The Company has established product liability reserves
based on currently available information, which in some cases may
be limited and changes to the reserves may be required in the future
as additional information becomes available.
Multiple products of Johnson & Johnson subsidiaries are sub-
ject to numerous product liability claims and lawsuits. There are a
significant number of claimants who have pending lawsuits or
claims regarding injuries allegedly due to ORTHO EVRA®,
RISPERDAL®, LEVAQUIN®, DURAGESIC®, the CHARITÉ™Artificial
Disc, CYPHER®Stent, and ASR™Hip. These claimants seek sub-
stantial compensatory and, where available, punitive damages.
With respect to RISPERDAL®, the Attorneys General of multi-
ple states and the Office of General Counsel of the Commonwealth
of Pennsylvania have filed actions seeking reimbursement of Medic-
aid or other public funds for RISPERDAL®prescriptions written for
off-label use, compensation for treating their citizens for alleged
adverse reactions to RISPERDAL®, civil fines or penalties, damages
for “overpayments” by the state and others, punitive damages, or
other relief. The Attorney General of Texas has joined a qui tam
action in that state seeking similar relief. Certain of these actions
also seek injunctive relief relating to the promotion of RISPERDAL®.
The Attorneys General of approximately 40 other states have indi-
cated a potential interest in pursuing similar litigation against the
Company’s subsidiary, Janssen Pharmaceutica Inc. (Janssen) (now
Ortho-McNeil-Janssen Pharmaceuticals Inc. (OMJPI)), and have
obtained a tolling agreement staying the running of the statute of
limitations while they pursue a coordinated civil investigation of
OMJPI regarding potential consumer fraud actions in connection
with the marketing of RISPERDAL®. In addition, there are six cases
filed by union health plans seeking damages for alleged overpay-
ments for RISPERDAL®, several of which seek certification as class
actions. One of these has been dismissed on Summary Judgment.
In the case brought by the Attorney General of West Virginia, based
on claims for alleged consumer fraud as to DURAGESIC®as well as
RISPERDAL®, Janssen (now OMJPI) was found liable and damages
were assessed at $4.5 million. OMJPI filed an appeal. The West Vir-
ginia Supreme Court accepted Janssen’s appeal from that Judgment
and the appeal was argued in September 2010. In October 2010, the
West Virginia Supreme Court unanimously reversed the trial court’s
decision. In December 2010, the Attorney General dismissed the
case as it related to RISPERDAL®without any payment. Thereafter,
the Company settled the case insofar as it related to DURAGESIC®.
In September and October 2010, a false claim suit brought under a
Louisiana statute was tried. The jury returned a verdict of $257.7 mil-
lion in favor of that State’s Attorney General and against Janssen
and the Company. Post-trial motions challenging the verdict will be
filed, and if unsuccessful, will be followed by an appeal. The Com-
pany believes that it has strong arguments supporting an appeal.
The Company believes that the potential for an unfavorable out-
come is not probable, therefore, it has not established a reserve with
respect to the verdict. In the Commonwealth of Pennsylvania suit
against Janssen, trial commenced in June 2010. The Judge dis-
missed the case after the close of the plaintiff’s evidence. The Com-
monwealth has filed post-trial motions which are pending. Other
cases scheduled for trial are in South Carolina, currently scheduled
in March 2011, and Texas scheduled in June 2011.
In August 2010, DePuy Orthopaedics, Inc. (DePuy) announced
a worldwide voluntary recall of its ASR™XL Acetabular System
and DePuy ASR™Hip Resurfacing System used in hip replacement
surgery. Claims for personal injury have been made against the
Company. The Company has received limited information to date
with respect to potential claims and other costs associated with this
recall. The Company’s product liability reserve has been increased in
part due to anticipated product liability expense, and costs associ-
ated with the DePuy ASR™Hip recall. However, at this point in time,
the Company cannot estimate the range of reasonably possible
losses with respect to this matter and changes to the reserve may be
required in the future as additional information becomes available.
PATENT LITIGATION
The products of various Johnson & Johnson subsidiaries are the
subject of various patent lawsuits, the outcomes of which could
potentially adversely affect the ability of those subsidiaries to
sell those products, or require the payment of past damages and
future royalties.
On January 29, 2010, Cordis Corporation (Cordis) settled a
patent infringement action against Boston Scientific Corporation
(Boston Scientific) in Delaware Federal District Court accusing its
Express2™, Taxus®and Liberte®stents of infringing the Palmaz and
Gray patents. Under the terms of the settlement, Boston Scientific
dropped its lawsuit in which Cordis’ CYPHER®stent was found to
have infringed their Jang patent and paid Cordis $1.0 billion on Feb-
ruary 1, 2010. Boston Scientific also agreed to pay Cordis an addi-
tional $725 million plus interest by January 3, 2011. On August 2,
2010, Boston Scientific paid the full $725 million plus interest. The
Company recorded the $1.7 billion in the fiscal first quarter of 2010.
Cordis granted Boston Scientific a worldwide license under the
Palmaz and Gray patents and Boston Scientific granted Cordis a
worldwide license under the Jang patents for all stents sold by
Cordis except the 2.25mm size CYPHER®.
Cordis has several pending lawsuits in the New Jersey and
Delaware Federal District Courts, against Guidant Corporation
(Guidant), Abbott Laboratories, Inc. (Abbott), Boston Scientific
and Medtronic Ave, Inc. (Medtronic) alleging that the Xience V™
(Abbott), Promus™(Boston Scientific) and Endeavor®(Medtronic)
drug eluting stents infringe several patents owned by or licensed to
Cordis. On January 20, 2010, in one of the cases against Boston
Scientific, alleging that sales of their Promus™stent infringed